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Low income IO with a large deposit

kilby_007
kilby_007 Posts: 738 Forumite
in Mortgages & endowments
Hello,


A friend of mine is looking to buy a house to flip (renovate & sell) but as he's on a low income he's asking for advice on how to approach the mortgage situation. He has a large deposit so will only need 40% LTV. The rough figures are below:-


Salary 12K
Deposit 75K
House Price £125K
Loan amount £50K


I've checked a few websites for him and found that most lenders don't lend to people on low incomes <20K. Can anyone suggest any lenders to try, or ultimately does he need to approach a mortgage advisor for a more customised deal?

Comments

  • ACG
    ACG Posts: 24,690 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    He needs bridging finance. Typically it is only available through brokers.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • kingstreet
    kingstreet Posts: 39,315 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Affordability for an interest-only mortgage is calculated using repayment mortgage terms.

    Property developers should use commercial finance. A residential mortgage is not suitable for someone planning to slap on the magnolia and flip. The six month rule used by many lenders will also prevents this.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • kilby_007
    kilby_007 Posts: 738 Forumite
    kingstreet wrote: »
    Affordability for an interest-only mortgage is calculated using repayment mortgage terms.

    Property developers should use commercial finance. A residential mortgage is not suitable for someone planning to slap on the magnolia and flip. The six month rule used by many lenders will also prevents this.


    It's likely to take longer than 6 months - has damp issues, needs new kitchen, bathroom, rewire and new boiler and he's doing most of the work himself in his spare time.
  • kingstreet
    kingstreet Posts: 39,315 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Good. His buyer won't struggle to get a mortgage then.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • kilby_007
    kilby_007 Posts: 738 Forumite
    kingstreet wrote: »
    Good. His buyer won't struggle to get a mortgage then.

    You've lost me on that one.
  • p00hsticks
    p00hsticks Posts: 14,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    kilby_007 wrote: »
    You've lost me on that one.

    kingstreet is saying that its a good thing that the renovation will take more than six months, as otherwise potential buyers could struggle to get a mortgage - many lenders won't allow mortgages on properties that have previously changes hands in the last six months.
  • p00hsticks
    p00hsticks Posts: 14,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    kilby_007 wrote: »
    Salary 12K
    Deposit 75K
    House Price £125K
    Loan amount £50K

    Surely he's going to need to allow something for the refurb as well ? Even if he's providing the labour, a new kitchen, bathroom and boiler is going to add up....
  • kilby_007
    kilby_007 Posts: 738 Forumite
    p00hsticks wrote: »
    Surely he's going to need to allow something for the refurb as well ? Even if he's providing the labour, a new kitchen, bathroom and boiler is going to add up....

    Already accounted for otherwise he'd have a larger deposit, this was just a question regarding mortgaging.
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